Correlation Between BURLINGTON STORES and GOODYEAR T
Can any of the company-specific risk be diversified away by investing in both BURLINGTON STORES and GOODYEAR T at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BURLINGTON STORES and GOODYEAR T into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BURLINGTON STORES and GOODYEAR T RUBBER, you can compare the effects of market volatilities on BURLINGTON STORES and GOODYEAR T and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BURLINGTON STORES with a short position of GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of BURLINGTON STORES and GOODYEAR T.
Diversification Opportunities for BURLINGTON STORES and GOODYEAR T
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BURLINGTON and GOODYEAR is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER and BURLINGTON STORES is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BURLINGTON STORES are associated (or correlated) with GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and GOODYEAR T go up and down completely randomly.
Pair Corralation between BURLINGTON STORES and GOODYEAR T
Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 0.62 times more return on investment than GOODYEAR T. However, BURLINGTON STORES is 1.61 times less risky than GOODYEAR T. It trades about 0.18 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about 0.06 per unit of risk. If you would invest 23,000 in BURLINGTON STORES on October 10, 2024 and sell it today you would earn a total of 4,800 from holding BURLINGTON STORES or generate 20.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
BURLINGTON STORES vs. GOODYEAR T RUBBER
Performance |
Timeline |
BURLINGTON STORES |
GOODYEAR T RUBBER |
BURLINGTON STORES and GOODYEAR T Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BURLINGTON STORES and GOODYEAR T
The main advantage of trading using opposite BURLINGTON STORES and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BURLINGTON STORES position performs unexpectedly, GOODYEAR T can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.BURLINGTON STORES vs. MAG SILVER | BURLINGTON STORES vs. MINCO SILVER | BURLINGTON STORES vs. INSURANCE AUST GRP | BURLINGTON STORES vs. VIENNA INSURANCE GR |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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